Thursday 25 April 2013 05.36 EDT
First published on Thursday 25 April 2013 05.36 EDT

George Osborne has welcomed news that Britain's economy expanded by a stronger-than-expected 0.3% in the first quarter of 2013, avoiding a triple-dip recession.

As the first estimate from the Office for National Statistics showed that a healthy performance from the services sector helped GDP growth to beat the 0.1% expected by City pundits, the chancellor said it was evidence that the coalition's policies were helping to "build an economy fit for the future".

"Today's figures are an encouraging sign the economy is healing," he said. "Despite a tough economic backdrop, we are making progress. We all know there are no easy answers to problems built up over many years, and I can't promise the road ahead will always be smooth, but by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future."

The key services sector expanded by 0.6% on the quarter, according to the ONS, while industrial production also grew, by 0.2% – though much of that was accounted for by North Sea output. The struggling construction sector declined by 2.5%.

The business secretary, Vince Cable, said: "Today's figures are modestly encouraging and taken alongside other indicators, such as employment figures, suggest that things are going in the right direction."

Despite the unusually cold weather in March, the ONS denied that the weather had had any measurable impact on the figures. While retailers suffered in January and March, that was partly offset by increased demand for energy from householders turning up their heating against the freezing temperatures outside.

The spring bounce in the economy will have come as a relief at the Treasury, with officials from the International Monetary Fund due to arrive in the UK on 8 May to scrutinise the coalition's policies. A negative number, after the 0.3% contraction in the final quarter of 2012, would have marked an unprecedented triple-dip recession.

However, Labour will seize on the fact that, as the ONS said in its statement, GDP "has been broadly flat over the last 18 months". Output from the economy remains 2.6% below its pre-crisis peak in 2008.

Tony Dolphin, chief economist at the Institute for Public Policy Research, said the economy was "stuck in a rut".

"Normally, we would expect the economy to grow by around 12% over any five-year period. The fact that it has contracted by 2.6% instead means almost 15% of potential output has been lost, along with the employment opportunities and tax revenues that would have accompanied it," he added.

David Brown, of New View Economics, said: "The government have been very, very lucky. They have avoided a third dip into recession by the skin of their teeth. There is nothing to celebrate over as the UK economy is not out of the woods yet."

Sterling hit its highest level against the dollar in two months after the news, rising by more than a cent, to $1.5414, amid speculation that the Bank of England will be less likely to expand its recession-busting quantitative easing programme against the background of a healthier economy.

"From a policy point of view the signs that the UK economy may be growing, albeit weakly, are probably enough to put to rest any chance that the Bank of England would expand QE in May," said David Tinsley, at BNP Paribas. Three of the Bank's nine members voted for an expansion of QE at their April meeting.